Rory Maher, CFA: rmaher@tbiresearch.com
Facebook is gaining an increasing share of online ad spend by major brands--at the expense of large portals like Yahoo, AOL, and MSN, say advertisers we've recently spoken with. Specifically: - 100% Reach Blocks on Facebook (homepage takeovers) now cost almost as much as a basic homepage takeover on Yahoo and MSN. Facebook is having some success getting large advertisers to buy these.
- Brand advertisers are also starting to move more of their search budgets to Facebook self-serve this year.
This is clearly a positive trend for Facebook. It's also bad news for the portals--Yahoo, AOL, and MSN. To the extent that search spending continues to move, it's even bad news for Google. "100% REACH BLOCK" RATES APPROACHING HOMEPAGE TAKEOVER RATES CHARGED BY THE BIG PORTALS Facebook defines a 100% reach block as: "Reach blocks allow advertisers to reach all of a specified demographic on a given day. Once a user sees the Engagement ad 5 times (the frequency cap), they will not see that advertisement anymore, and your remaining impressions reach other users in the target."
With a "reach block," advertisers can buy all the banner and video inventory on the homepages of users that fall within the targeted demographic. Big reach blocks cost north of $300,000 per day. Facebook would only say these campaigns are "not uncommon," which we interpret as meaning they are fairly common. However, more telling is the fact that the Facebook's reach pricing is now approaching basic homepage takeover rates for the big portals. (To be fair, if special inventory is included, the portals can receive significantly more.) Advertisers that have recently bought Facebook reach blocks include: - Starbucks
- Cadburys
- Little Debbie's
BIG BRANDS SHIFTING INCREASING SEARCH SPEND TO FACEBOOK, TOO We noticed a small number of search advertisers starting to move budgets to Facebook's hyper-targeted self-serve about six months ago. We have seen this trend accelerate in 2010. Of particular importance is the fact that large brands are now slowly coming on board (initially, self-serve was mostly used by small local businesses). Ikea, Dennys, and World Wrestling Entertainment are large brands that have used the self-serve product recently. FACEBOOK IS GROWING MUCH FASTER THAN THE BIG PORTALS Facebook is able to sell ad packages that rival those of the portals because it receives premium rates in return for the targeting it provides (double-digit CPMs in many cases). In addition, the social network site is rapidly approaching the portals in terms of audience size. The site generates tons of page views per visitor, which enabled Facebook to surpass Yahoo in terms of total page views in late 2009. However, it is also rapidly approaching the portals in terms of unique visitors. If the trend in the chart below continues, it won't be long before Facebook commands an audience the same size as companies like Yahoo, MSN, and AOL in the US. 
STILL, NOT ALL ADVERTISERS ARE PERSUADED
Not everyone we speak with is throwing dollars at Facebook (though we suspect it won't be long before most online budgets incorporate the platform in one way or another). For example, one major agency that handles large consumer-packaged-goods (CPG) spending is not currently steering much of its online budget to Facebook, citing a lack of quality inventory. In addition, GEs recent Healthymagination campaign put about 15% of its $80 million budget toward online spending, but none of it went to Facebook. However, none of it went to the portals either. Niche sites like Politico got the bulk of these dollars (which is more bad news for big portals). | 
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